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Business Summary
This factsheet provides specialized information on establishing and operating a direct market poultry enterprise. This information was generated by a group of producers/marketers who arrived at a consensus of opinion on investment, production, marketing requirements, costs and revenues associated with developing a viable poultry enterprise.
This information is intended as a business planning tool. Managers will have to assess all the key production and financial variables that would influence the success of their enterprise.
Production Basics
The enterprise would produce and direct market pasture raised chickens. The chicks would spend three weeks in the brooder house and six weeks on pasture, attaining a liveweight of eight pounds and a carcass weight of 5 to 6 pounds.
This start up enterprise would allow individuals to test their production capabilities and market potential on a small scale. Initial target markets would be direct sales through family and friends, moving towards farmer’s markets with increased production and market development.
Production targets
| Projected Mortality1 Rates | Best case | Most likely |
| Year 1 | 5% | 30% |
| Year 2 | 5% | 15% |
| Year 3 | 5% | 10% |
Financial benchmarks
 | Year 1 | Year 2 | Year 3 |
| Gross operating profit2 | ($341) | $1,056 | $5,817 |
| Return to management6 | ($383) | $ 435 | $4,974 |
Capital investment
| X | Year 1 | Year 2 | Year 3 |
| X | Start up | Expansion | X |
| Land (.1 acre) | X | X | X |
| Improvements | X | X | X |
| Utilities (1% share) | $50 | X | X |
| Additional fencing | X | $200 | $200 |
| Facilities | X | X | X |
| Brooder house | $100 | X | X |
| Improved brooder facility | X | $7,000 | X |
| Additional shelters (9) | X | $2,700 | $2,700 |
| Equipment | X | X | X |
| Lamps & bulbs | $68 | X | X |
| Waterers | $12 | X | X |
| Feeders | $15 | X | X |
| Shelter | $300 | X | X |
| Predator fence | $ 20 | X | X |
| Fencer | $135 | X | X |
| Feed storage | $100 | X | X |
| Crates (optional) | X | X | X |
| Heater with tanks and hoses | X | $400 | $400 |
| Used bell waterers | X | $200 | $200 |
| Feeders (5) | X | $75 | $75 |
| Water tank & system for | X | $1,000 | X |
| pasture watering | X | X | X |
| Vehicles | X | X | X |
| Delivery van/truck (1% share) | $150 | X | X |
| x X | X | X | X |
| Total Capital Investment | $850 | $11,575 | $3,575 |
Market Basics
Marketing activities should build a reputation as a reliable supplier of a good quality product. First year marketing activities would be directed toward gaining word of mouth endorsements. Key activities would include:
- Developing and printing brochures
- Mail out brochures, telephone contact and follow up
- Developing and printing business cards
- Stall rental and travel costs to farmers markets
- Developing display items for farmers market stall
- Promotion activities
- Providing sample products to family, friends and potential buyers
Skills, Abilities and Strategies - Direct Market Poultry Enterprise
Capabilties
New entrants to poultry production for direct marketing should assess their personal capabilities with managing a direct market poultry enterprise and developing a market for their unique product.
Personal capabilities required for developing a direct market poultry enterprise
- People skills
- Willing to learn production and marketing skills
- Have clear goals and objectives for the enterprise
- Be food producers rather than commodity producers
- Must like poultry
- Have capacity to adjust to dynamic environment
Key marketing activities/capabilities for developing a direct market poultry enterprise
| 1. | Develop a market strategy and gain a market presence |
| 2. | Determining what consumers value |
| 3. | Identify target markets |
| 4. | Be able to articulate description and benefits of product |
| 5. | Have an obsessive approach to marketing |
| 6. | Educating consumers about differentiated products |
| 7. | Develop market demand to match seasonal nature of production |
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Regulatory considerations
- Supply management quota limits restict producers to 2,000 broiler and 300 turkeys per year without quota.
- Processing for resale must take place in either a provincial or federally inspected
Development strategies
Effective strategies for developing a direct market poultry operation must consider market development, production capabilities and risk. Generally, production capabilties and the market should need to take place simultaneously rather than one preceding the other. New entrants should test both their production capabilities and the market with a small scale start-up of one shelter housing 60 birds and having 42 birds to market or give to friends and family as product promotions.
Development strategies also need to consider how fast to grow in the second and third years of operation. One strategy is to increase production and develop markets slowly. This risk adverse strategy would involve doubling production to two shelters (120 birds) and marketing 96 birds in the second year of operation then doubling production again to producing 240 birds and marketing 192 birds in the third year of operation.
A more aggressive strategy for developing production and markets would be purchasing 1,000 birds and achieving 850 marketable birds in the second year and doubling production to 2,000 purchased birds and processing 1,800 marketable birds in the third year of operation. This approach will also require the development of infrastructure in terms of arrangements with processors and truckers. Factors to be considered in making this decision include risk exposure, viability of the operation and market potential.
Promotional samples are an important marketing tool. Some portion of the first year’s production (maybe even 100%) could be distributed as promotional samples to gain market presence and valuable feedback about the quality of the product marketed. In this fact sheet, family consumption and samples are as follows: 21 head (year 1), 30 head (year 2), 50 head (year 3).
Projected revenue and expenses - direct market poultry enterprise
Projected Revenues | No. | Price | X | Revenues | X | Your Snapshot |
| X | X | ($/lb) | Year 1 | Year 2 | Year 3 | X |
| Bird sales (5 pound birds) | 21 | $2.75 | $ 289 | X | X | X |
| X | 820 | $2.75 | X | $11,275 | X | X |
| X | 1,750 | $2.75 | X | X | $24,063 | X |
| Total Projected Revenues | X | X | $289 | $11,275 | $24,063 | X |
| X X | X | X | X | X | X | X |
| Projected Direct Costs | X | $/chick | X | X | X | X X |
| Chicks | X | $1.00 | $ 60 | $1,000 | $2,000 | X |
| Feed (brooder & pasture) | X | $2.80 | $168 | $2,800 | $5,600 | X |
| Cleaning supplies | X | $0.02 | $1 | $20 | $40 | X |
| Freight (chicks to yard) | X | $0.10 | $6 | $100 | $200 | X |
| Freight (farm to processor) | X | $0.46 | X | $391 | $828 | X |
| Power | X | X | $20 | $20 | $40 | X |
| Propane | X | $0.10 | $ 6 | $100 | $200 | X |
| Bedding (shavings) | X | $0.11 | $7 | $110 | $220 | X |
| Vehicle operating | X | X | X | $100 | $250 | X |
| Labour to load birds | X | $0.15 | X | $128 | $270 | X |
| Processing | X | $1.25 | $53 | $1,063 | $2,250 | X |
| Bagging | X | $0.60 | $25 | $510 | $1,080 | X |
| Weighing | X | $0.15 | $6 | $128 | $270 | X |
| Freezing | X | $0.15 | $6 | $128 | $270 | X |
| Boxing | X | $0.36 | X | $306 | $648 | X |
| Sorting | X | $0.05 | X | $38 | $90 | X |
| Condemning | X | $0.01 | X | $8 | $18 | X |
| Transport to freezer | X | X | X | $160 | $300 | X |
| Storage costs (3 months) | X | X | X | $400 | $800 | X |
| Marketing costs | X | X | X | X | X | X |
| XXXConferences | X | X X | X | X | $350 | X |
| XXXTelephone | X | X X | $150 | $150 | $150 | X |
| XXXBrochures, newspaper ads | X | X X | X | $100 | $350 | X |
| XXXMarketing skills development | X | X | X | X | $150 | X |
| Interest on operating 3 | X | X | $18 | $281 | $594 | X |
| Total Projected Direct Costs | X | X | $527 | $8,044 | $16,968 | X |
| X | X | X | X | X | X | X |
| Projected Indirect Costs | X | X | X | X | X | X |
| Depreciation4 of facilities & improvements | X | X | $ 8 | $674 | $877 | X |
| Depreciation of equipment | X | X | $95 | $233 | $401 | X |
| Total Projected Indirect Costs | X | X | $103 | $937 | $1278 | X |
| X | X | X | | X | X | X |
| Total Projected Direct & Indirect Costs | X | X | $629 | $8,981 | $18,245 | X |
| X | X | X | X | X | X | X |
| Gross Operating Profit | X | X | ($341) | $1,056 | $5,817 | X |
| X | X X | X | X | X | X | X |
| Interest on Investment 5 | X X | X | X | X | X | X |
| Facilities & improvements | X | X | $8 | $503 | $ 650 | X |
| Equipment | X | X | $36 | $119 | $194 | X |
| Total Interest on Investment | X | X | $43 | $622 | $844 | X |
| x | X | X | X | X | X | X |
| Total Projected Economic Costs | X | X | $672 | $9,603 | $19,089 | X |
| x X | X | X | X | X | X | X |
| Return To Management 6 | X | X | ($ 383) | $435$ | 4,974 | X X |
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Sensitivity Analysis
The profitability of a direct market poultry enterprise will be strongly influenced by the price per pound received for birds and the cost per pound marketed. The table below shows the effect on return to management of the changes in the market prices for birds based on 1,750 birds marketed.
| Cost Per Pound Marketed | Price Per Pound Marketed |
$2.00 | $2.75 | $3.50 |
$1.75 | $2,188 | $8,750 | $15,312 |
$2.00 | $0 | $6,562 | $13,125 |
$2.25 | ($2,188) | $4,375 | $10,937 |
$2.50 | ($4,375) | $2,188 | $8,750 |
$2.75 | ($6,563) | $0 | $6,563 |
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Labour Requirements
The estimated labour requirements for the start up year are presented in the following table:
| Hours |
| Placing chicks | 10 |
| Management in brooder | 10 |
| Management on pasture | 21 |
| Processing | 10 |
| Marketing | 10 |
| Total Hours | 61 |
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Definitions
| 1 | Mortality: Death loss. |
| 2 | Gross operating profit: The amount remaining after direct and indirect expenses have been paid. |
| 3 | Interest on operating: The interest on an operating loan, calculated at 7.25% for 6 months. |
| 4 | Depreciation: The reduction in the value of an assets over its lifetime. |
| 5 | Interest on Investment: The cost of investing in capital assets rather than in a financial investment. Valued at 10% on all asset categories. |
| 6 | Return to Management: An amount left to compensate the owner-operator for risk and management. |
Management Strategies
Key management strategies that will contribute to the production and economic performance of the enterprise:
- Communicating with other producers.
- A clear and effective business philosophy that balances respect for the birds, the importance of family and the need for economic returns.
- It is ok to be a small direct marketer.
- Individuals must be prepared to learn on a continuous basis.
- When considering strategies for expansion, managers should thoroughly investigate the opportunities for different market weights for birds.
- Managers should investigate other opportunities for marketing turkeys, organic poultry and other unique products.
- There is a significant level of market development required to become established.
- New entrants will need to thoroughly assess the market, the regulatory environment and find a fit for their individual capabilties and resources.
- Producers should expect a range in weights due to factors such as feed, the sex of the birds, weather and the amount of daylight while on pasture.
For more information, contact:
Alberta Agriculture, Food and Rural Development Production, Marketing, Economics and Business Planning & Development - Contact the Alberta Ag-Info Centre at 1-866-882-7677 or visit our website at: http://www.agric.gov.ab.ca
Publications
Pasture Poultry Industry - Ag Ventures, 2000 Agdex FS450/830-1
Why Grassfed Is Best - Jo Robinson
This book is available at: www.eatwild.com
The Stockman Grass Farmer
A newsletter devoted to the art and science of turning grass into cash flow. Subscriptions are available at: www.stockmangrassfarmer.com
The following people contributed to the preparation of this factsheet:
Dennis Dey, Farm Management Consultant, Olds
Dean Dyck, P. Ag., Financial Business Analyst, Red Deer
Rod Carlyon, Business Development, Westlock
Source: Agdex 450/821-1. April 2002.
The contents of this page are no longer available.
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